Common Cents & British Politics on December 13, 2019

Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.

Isaac Newton


Yesterday, the Conservative Party (CP or Tory) in the United Kingdom (UK) won a resounding victory over the Labour Party in the General Election 2019. This wasn’t a huge surprise, as recent polling showed the Tories ahead. Still, the magnitude of the victory was, as the Tories picked up 47 seats in Parliament to give them their largest majority in Parliament in over 3 decades. What’s more, the CP got 44% of the general vote, the highest amount since 1979.

Coincidental or not, the British pound and the London Stock Exchange are both rallying strongly today; you decide.

Also, I should probably mention Nicola Sturgeon’s Scottish National Party captured 48 seats out of the 59 available in Scotland. Combined, it was a massive defeat for Labour, which had continued to shift ‘left of center’ under leader Jeremy Corbyn. Zack Beauchamp on the left-leaning vox.com website put it this way: “But what’s clear is that Labour’s theory of the case – that its socialist policy manifesto would be able to win back Brexit voters in its traditional working-class heartland and secure the cities – was a failure.”

While the UK is grappling with Brexit, Labour put forth what it called a ‘Manifesto’ for the country, which covered a whole litany of different topics for the General Election. In case you are interested, you can access it here: https://labour.org.uk/manifesto/.

If you go to the website and scroll down the page, you will see ‘Additional Manifestos.’ These are: Youth Manifesto, Charter for the Arts, Race & Faith Manifesto, Environment Manifesto, Manifesto for Disabled People, Workers’ Rights Manifesto, Regional Manifestos, Your Personal Manifesto, and Housing Manifesto. Under Regional Manifestos, you can find a separate one for: East of England, East Midlands, London, North East, North West, South East, South West, West Midlands, and Yorkshire & the Humber.

I think you get the point: Labour had/has an answer, policy, or government solution for just about everything, and I am not being terribly hyperbolic. Is that what the British people really want? The election results would suggest maybe not.

With the obvious exception of Brexit, the United States seems to grappling with many of the same issues as the British. Boiled down for simplicity, the question at hand appears to be: just how involved do ‘we’ want the government to be in our lives and our economies? Hmm, that is a good one.

Long years ago, while on one of the many long road trips from Alabama to Westminster, MD, we took to visit my grandparents, my family stopped for the evening in the Bristol area off I-81. The restaurant attached to the hotel was a Chinese joint, which was still pretty novel to me at the time, to all of us really. So much so, my father didn’t quite know what to think of page after page of menu items. Many of the dishes didn’t even have names, just numbers and pictures. This bothered the old man greatly, and he told us all to get up from the table in order to leave. Oh boy, I distinctly remember walking out of that restaurant, although I am certain it wasn’t under the withering of my imagination.

My dad’s explanation for his decision, and thus my older sister’s great embarrassment, was simple: “there were too many items on the menu. There was no way any of them was going to be any good.” What is the old expression? Jack of all trades and master of none? That works, so does: “you can’t be all things to all people.” Amen.

With this in mind, it seems you can find an opinion or an argument for a government solution for just about every inequity known to mankind, whether real or perceived. This week, my co-worker Sam C. sent me an article about how monetary policy is fostering income/wealth inequality in the United States. The solution? Well, the writer suggested the Federal Reserve needs to get into the business of directly making low-cost loans and offering high-yield deposits for some segment of the population. The bottom quintile of income earners? Undoubtedly! The bottom 4 quintiles? Why not? No credit? No income? No problem. Gee, that sounds great, doesn’t it? But does it sound simple and won’t the ‘devil be in the details’? The Federal Reserve making microloans to the masses?

Nowhere in the article does it mention things like age, education, work experience, and even boring old marital status being causes of household wealth and income inequality. Not surprisingly, the wealthy tend to be disproportionately middle-aged, well-educated, employed, and married. The poor among us tend to be younger, more poorly educated, unemployed, and single. Perhaps the Federal Reserve should get into the matchmaking business too! The front page of Tiger Beat magazine (if it still exists) could proclaim: “Win a Date with Dreamy Fed Chairman Jay Powell!”

Obviously, that is both silly and cavalier. Still, I am attempting to bring home a point: the economy and society don’t need new solutions as much as it needs better execution. The least fortunate tend to be more poorly educated? Why are they poorly educated when we spend as much money as we do on education? According to a study I read issued by the Federal Reserve Bank of Minneapolis in April 2016, over 30% of the bottom decile in household income are single-parent households. Understanding human beings are irrationally rational and will respond to incentives, what policies do ‘we’ have in place which engender this? If the goal is to consume fewer fossil fuels, would it make sense to simply raise the gasoline tax, perhaps substantially? Or should we retool the entire US economy altogether?

The list goes on, and I will spare you.

Let me start closing with this: the more complicated and broader the initiative, the greater the uncertainty it will work. The greater the uncertainty, the more people will turn away. The more people turn away, the less they will invest and spend. The less they invest and spend, the greater the economic weakness. The greater the economic weakness, the more complicated the proposal. Somewhere I hear Joni Mitchell singing:

And the seasons they go round and round

And the painted ponies go up and down

We’re captive on the carousel of time

We can’t return we can only look behind

From where we came

And go round and round and round

In the circle game

Okay, that was kind of arty, but I kind of liked it.

In closing (finally, huh?) and speaking of liking, investors and economies tend to like simplicity, ease of execution, and freedom of choice. If Labour had delivered THAT manifesto, instead of a multitude of them, it could/would/should have won yesterday’s election in the UK. To that end, the party which delivers the simplest, least complicated, and easiest to execute vision of the future will likely win our elections next November.

Will either party be able to deliver one? If so, which one will it be?


Have a great weekend.


John Norris


As always, the opinions in this newsletter are mine alone, and do not necessarily reflect the views or opinions of Oakworth Capital Bank or anyone else associated with it. They reflect my opinions as of the time of its initial publication (12/13/2019) and are subject to change without notice. Finally, they should not be considered an offer to buy or sell investment products, services, or advice.